13 October 2009

The World’s Largest Manufacturer of Greenhouse Gases

This [unedited] guest post is by a student in my EEP100 class (background post). Please praise/critique/comment on its economic quality and importance to you.Julie Zhu says:

The past two and a half decades we have seen China emerge as one of the world’s superpowers. The ‘World’s Manufacturer,’ has seen rises in exports, while simultaneously has seen declines in air and water quality. Its citizens exchange health for rapid industrial and economic development. As China continues to grow, the stratification of classes becomes more and more polarized and ultimately the rural citizens suffer most.

From recent developments, we can see the extent to which air pollution has taken a toll on its citizens. Across China, hospital officials have found that thousands of children living near factories have abnormal amounts of lead in their bloodstream.

Many of the country’s children living near factories are being tested after 154 children had lead levels so high that they were hospitalized in a village in Shaanxi Province. These children were only 20% of children found near the same plant to have excessive levels of lead in their blood.

According to the World Health Organization, as of 2007, nearly 1.5 million premature deaths occur in China due to air and water pollution annually.

The government is already starting to bear the external costs of plants emitting toxins. The government’s response to Shaanxi is it will allocate $29 million to move 1,400 families who live near the plant.

However, are these measures enough to prevent future incidents? The larger question at stake is if these citizens were aware that these plants were emitting toxins, would they still have lived in such close proximity?

China’s recent $586 billion stimulus package will focus a large part on advancing roads and railways. Perhaps some portion of China’s largest stimulus package in history should go towards environmental education—educating the public on risks and health issues associated with toxins. At the upcoming United Nations Climate Change Conference in Copenhagen, we will hear what China has to say about reducing toxic emissions.

Bottom Line: China cannot focus blindly on expanding its economy without taking into consideration the interest of its citizens who are negatively affected by pollution (externality). Thus, the Chinese government should increase the level of transparency and educate the public on environmental issues that directly affect their well-being.

I have seen this pattern before. Authoritarian regimes are not good at balancing trade-offs. Further, desperately poor people concentrate on basic survivial and satisfaction of their basic needs, food, shelter, clothing, etc. Only when these needs are sufficiently satisfies do they term to other needs in Maslow's Hierarchy of needs. Poor people are very short term oriented.

In first world countries, basic needs are almost universally satisfied, so now safety needs are a higher motivator. Environmental regulation becomes a center of debate.

China is rapidly lifting its population out of poverty, though I understand large portions of the country still have very low standards of living. I believe the question is not, why does the Chinese goverment not address pollution externalities, but how long will it be before a sufficient level of wealth is attained so that reducing pollution becomes a priority?

Bottom Line: Since we are all citizens of the planet earth, the timing of China's transition to recognizing externalities.